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Bankruptcy Keyed to Levitan, 3rd Ed.
In re Sharon Steel Corp.
Citation:
871 F.2d 1217 (1989)Facts
Sharon Steel Corporation, a steel manufacturer in Pennsylvania, filed for Chapter 11 bankruptcy in April 1987 while facing severe financial difficulties, including $742 million in liabilities and only $478 million in assets. Victor Posner served as chairman, president, and CEO of Sharon, while DWG Corporation, also controlled by Posner, provided financial management services to Sharon. Five months after the bankruptcy filing, the Committee of Unsecured Creditors petitioned for appointment of a trustee, citing dissatisfaction with management’s progress. The bankruptcy court found numerous questionable pre-petition transfers, including a $3.7 million wire transfer to DWG, transfer of a yacht and airplane to another Posner-controlled company, transfer of valuable stock shares, and approximately $16 million in compensation to Posner, including $4.4 million for his personal criminal defense. Post-petition issues included failure to close out pre-petition books, failure to produce current financial statements, continued monthly losses of approximately $2 million, and failure to renegotiate a high-interest working capital loan that was costing Sharon an extra $4 million annually. The bankruptcy court determined these actions constituted gross mismanagement and appointed a trustee despite attempts by the parties to negotiate a stipulation that would have provided for independent management without a trustee.
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